Solana Experiences 5% Drop Amid FTX Sell-off Concerns and Ethereum Competition
Summary:
Solana (SOL) experienced a 5% fall in one day due to concerns about further sell-offs from cryptocurrency exchange, FTX. The trend could result in a loss of $125 million if Solana quickly recovers, as seen in recent history. This fall also coincides with a 40% drop in Solana's open interest over the past month and an overall downturn in cryptocurrency market sentiment. New findings about Solana's potential to overtake Ethereum in transaction fees could positively impact its price.
In a single day, Solana (SOL), experienced a 5% fall due to growing fears of additional sell-offs from cryptocurrency exchange, FTX. The current market developments point to potential losses amounting to $125 million if SOL experiences another quick rebound, as has been its trend. CoinGlass data shows a 40% drop in Solana's open interest (OI) over the past month, with a documented $1.78 billion on May 9. This dramatic dip in OI usually indicates a lack of trader confidence in the digital currency, due to uncertainty surrounding its price movements. Given Solana's recent pattern of promptly recouping following dips, short positions worth more than a hundred million dollars could be at risk.
Over the last month, Solana's price has exhibited fluctuations, both declining and rising by 5% within a 24-hour period. On April 19, following a similar 5% decline, the asset swiftly bounced back to $157, just ahead of Bitcoin's halving on April 20. If the price of Solana increased by 5% to regain its May 7 position of $157, it would lead to the liquidation of $125 million in short positions. Significant short positions stand in jeopardy if the asset bounces back to $157.
CryptoAce, an anonymous cryptocurrency trader, correctly forecasted this price drop to around $142.50, in the days leading up to Solana's plunge on May 7. This recent descent might be linked to FTX's announcement on the same day that it had sufficient funds to reimburse the victims of its collapse after the sale of assets, a substantial proportion of which are Solana.
This development coincides with a downturn in overall cryptocurrency market sentiment, as the Fear and Greed Index score slumped by 13 points within the past 24 hours, landing on 54 on May 9. However, new revelations surrounding the rivalry between Solana and Ethereum might also be influencing its short-term prices.
On May 8, Cointelegraph speculated that Solana's network could potentially surpass Ethereum's network in transaction fees, a promising indicator for a price boost for Solana. As of May 7, Solana's total economic value of $2.8 million was in close proximity to Ethereum's $3.1 million.
This report does not act as investment guidance or suggestions. Investing and trading involves inherent risk and it is advisable for readers to conduct independent research prior to making any financial decisions.
Published At
5/9/2024 9:08:14 AM
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